Despite bad news about cryptocurrencies — the monumental price drops, the bankruptcies, the thefts, the corruption — true believers aren’t looking for a way out. In fact, it’s usually the opposite. Financial adviser Chelsea Ransom-Cooper has a client who had large holdings of cryptocurrency that he sold last year, making incredible returns. For early adopters, total returns on bitcoin
from 2015 to the peak in 2021 could be upward of 4,000%.
What’s the client doing now with all that cash? “Looking for an opportunity to buy more crypto,” says Ransom-Cooper, managing partner at Zenith Wealth Partners in Philadelphia. Another client won’t get out at all, despite suffering steep losses on paper. “We talk about the value of a diversified portfolio and not being overly concentrated in crypto, but when you have such a high risk tolerance, the only thing attractive is another high risk,” says Ransom-Cooper. So even though bitcoin is down more than 60% this year — over three times the decline in the S&P 500 Index
of the largest U.S. companies — the potential for stratospheric returns on cryptocurrencies can be enticing. And it makes getting 3% in a high-yield savings account or 4% in Treasury inflation-protected securities (TIPS) seem ridiculous. “Nobody wants to get rich slow,” says Ryan Losi, a CPA and executive vice president at PIASCIK, based in Glen Allen, Virginia, who handles a lot of clients with cryptocurrency holdings. “But a lot of people who come into riches quickly don’t know what to do with that money, like people who win the lottery. You look down the road and they have zero.”Defining goals For crypto investors, the all-in mentality can be tempered by one of the first steps of financial planning, which is setting goals. “You have to ask: What is the purpose for the money? Fun doesn’t have to be antithetical. But thinking that it’ll be a continuous windfall is not how our markets work,” says Amanda Clayman, a financial therapist based in Los Angeles. Financial adviser Doug Boneparth, who has an interest in crypto himself, has had many conversations with his clients about goals as a way for them to figure out when they’ve reached them, and then they’ll know it’s time to get out. If you stay in, you might get to your goal sooner, but you might also very well miss the opportunity to get there at all. “You need to have …